LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 22, 1997
TO: Honorable Kenny Marchant, Chair IN RE: House Bill No. 1188, Committee Report 1st House, Substituted
Committee on Financial Institutions By: Danburg/et al.
House
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB1188 ( Relating
to a voluntary, consensual encumbrance on homestead property
for the purpose of an equity loan.) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by HB1188-Committee Report 1st House, Substituted
Implementing the provisions of the bill would result in a net
positive impact of $428,000 to General Revenue Related Funds
through the biennium ending August 31, 1999, contingent upon
the passage of a constitutional amendment allowing home equity
lending.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal Analysis
Upon passage of a constitutional amendment providing for home
equity lending, this bill would create a division within the
Office of the Consumer Credit Commissioner for the purpose of
licensing, examining and verifying compliance of lenders with
the provisions of the bill. The Office of the Consumer Credit
Commissioner projects that additional examiners will be required
to examine an increased number of licensed lenders at an increased
cost per examination as a result of the added complexity of
the type of examinations conducted. Collected revenues would
increase due to the licensure of more regulated lenders, and
from fees collected as a result of charges assessed to lenders
for examinations.
The bill would also direct the Consumer
Credit Commissioner to establish and maintain an equity loan
recovery fund. Money in the fund would be used for reimbursing
aggrieved persons who suffer actual damages. Money received
by the consumer credit commissioner for deposit in the equity
loan recovery fund would be held by the consumer credit commissioner
in trust for carrying out the purposes of the fund. The finance
commission would be required to establish and collect reasonable
and necessary fees from each authorized lender for each home
equity loan originated by the lender to accomplish the purposes
of the fund. Fees collected shall be held in trust by the Consumer
Credit Commissioner.
Methodolgy
The Office of the Consumer Credit Commissioner's projected revenues
of $1.3 million during the first year of implementation include
increased licensing fees resulting from a projected increase
in the number of lenders, as well as revenues generated from
examinations. The agency will charge a $150 surcharge per visit,
plus $32 per hour of examination.
The agency projects that
the cost of the new division would include 22 additional FTEs,
including 5 examiners, 2 assistant examiners, 3 financial analysts,
2 attorneys, 1 consumer education specialist, and 9 administrative
technicians. Salaries are projected at $740,000 per year.
With additional travel and related operating costs, the total
costs of operation and staffing is estimated at slightly over
$1 million dollars per year.
Collection of funds for the
equity loan recovery fund depends on rules established by the
Finance Commission. No amounts for this fund can be projected
until such rules are promulgated.
The Comptroller notes
that, even though bill specifies that the Equity Loan Recovery
Fund would be held in trust by the Office of Consumer Credit
Commissioner, these funds could potentially be considered a
new dedicated account in the General Revenue Fund. This fiscal
note assumes that the Equity Loan Recovery Fund would not be
a new dedicated account in the General Revenue Fund.
The probable fiscal implications of Implementing the provisions
of the bill during each of the first five years following passage
is estimated as follows:
Five Year Impact:
Fiscal Year Probable Probable Revenue Probable Revenue Change in Number
Savings/(Cost) Gain/(Loss) from Gain/(Loss) from of State
from General General Revenue Other Funds - Employees from
Revenue Fund Fund Equity Loan FY 1997
Recovery Fund
0001 0001 8042
1998 ($1,077,000) $1,256,000 $110,000 22.0
1998 (1,012,000) 1,261,000 110,000 22.0
2000 (1,023,000) 1,261,000 110,000 22.0
2001 (1,043,000) 1,261,000 110,000 22.0
2002 (1,090,000) 1,316,000 110,000 22.0
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 $179,000
1999 249,000
2000 238,000
2001 218,000
2002 226,000
Similar annual fiscal implications These impacts would continue
as long as the provisions of the bill are in effect.
No fiscal implication to units of local government is anticipated.
Source: Agencies:
LBB Staff: TH ,JA